Incoming Labour government must nix oil and gas windfall tax and allow offshore licensing, OEUK says
Industry body Offshore Energies UK (OEUK) has congratulated Labour leader Keir Starmer on his party’s win in the general election but has also expressed its concerns regarding the future of the country’s offshore industry.
Earlier this morning, it was announced that the UK’s Labour Party officially won more than the needed 326 seats in the UK’s 2024 general election to have a majority in parliament. By extension, Labour leader Keir Starmer will become the country’s new prime minister. According to media reports, Labour is currently holding 409 seats, the most since 2001 and the leadership of Tony Blair, with more votes to be counted.
This change in the government and the voting power within parliament will also see a change in the relations between the next inhabitant of 10 Downing Street and the UK offshore energy industry.
OEUK said it was committed to working with the new government on the next steps to a homegrown energy transition, to safeguard energy security, jobs and skills, and create an ‘irresistible investment environment’ in the UK.
However, OEUK warned many of the industry’s skilled people and investors remain deeply concerned about Labour proposals for a further windfall tax on homegrown oil and gas production and to end new oil and gas licences in UK waters.
The industry body claimed that such measures would not create the investment conditions the UK needs to deliver the homegrown energy transition needed to kickstart economic growth.
“These policies, if poorly managed, and without industry input will threaten jobs and undermine the decarbonisation of the UK economy. The details matter,” said David Whitehouse, chief executive of OEUK.
The windfall tax, or as it is officially known – the Energy Profits Levy (EPL), was introduced by the UK then chancellor and the soon-to-be former UK prime minister Rishi Sunak in 2022 as a way of helping households with rising energy bills following Russia’s invasion of Ukraine. The 35% surcharge on profits due to high energy prices was supposed to end in March 2028 but was extended until March 2029 earlier this year. With the surcharge, the overall tax burden faced by UK oil and gas producers to about 75%.
Currently, the price of gas in the UK is several times lower than the peaks seen when the tax was introduced, and the price of oil has returned to the level before the Ukraine invasion making the windfall tax no longer defenceable.
According to OEUK, the UK offshore energy industry is set to invest £200bn over the next decade in domestic energy projects. The 200,000 jobs and secure homegrown energy offered by the UK’s unique mix of oil and gas, wind, hydrogen, and carbon capture technologies offer a future, but OEUK believes that the industry needs some renewed confidence to invest.
“Labour leadership has recognised that North Sea oil and gas will be with us for decades to come and is committed to managing this strategic national asset in a way that does not jeopardise jobs. The transition is estimated to cost £1.4trn, the lion’s share of which will need to come from the private sector. We need the new Labour government to follow through on assurances to work in partnership with the sector, listen to our skilled people, and ensure no one is left behind in the UK’s energy transition,” Whitehouse added.
